Business Essentials for Professionals


Slowing EV Growth Forces GM And Ford Rely On Gasoline-Powered Trucks

Slowing EV Growth Forces GM And Ford Rely On Gasoline-Powered Trucks
When U.S. automakers Ford and General Motors release their first-quarter earnings next week, they will both be up against the same obstacle: elucidating to investors the source of future profit growth as EV growth slows.
The past year has seen a downturn in the demand for electric vehicles worldwide, increased competition from Chinese manufacturers, and high borrowing prices in the United States, which have caused American automakers to postpone investments and reduce expenses. A boost to macroeconomic growth appears distant given the weakening of China's economy and the high level of inflation in the United States.
Due of this, automakers such as General Motors and Ford are concentrating on selling their primary gasoline-powered cars, which account for the majority of their profits. The results from GM and Ford are expected to be released on Tuesday and Wednesday, respectively.
Strong demand for the automaker's very profitable pickup trucks and SUVs under the Chevrolet and GMC brands will help GM CEO Mary Barra. Barclays increased its target price for GM shares by 10% to $55 earlier this month, citing strong sales of the company's truck and SUV lines.
While Ford Chief Financial Officer John Lawler reiterated the company's forecast for full-year profit, GM Chief Financial Officer Paul Jacobson stated that the year was off to a strong start and that the company felt optimistic about the direction that demand was moving.
History U.S. manufacturers have been hindered by increased costs associated with electrifying their vehicle portfolios and erratic demand for battery-electric vehicles, as they mainly rely on sales of heavy trucks and SUVs.
In order to repair an accelerator pedal that might become stuck and raise the risk of a mishap, Tesla is recalling about 4,000 of its Cybertrucks.
In a research note, Chris McNally, an analyst at Evercore ISI, stated that as the rise in EV sales slows, the momentum has switched for the prior victors, like Tesla. He continued, "Investors are now more focused on companies like GM, Stellantis, Toyota, and others that depend less on EVs."
GM's high proportion of EVs to gas-burning trucks in its North American sales mix will somewhat offset the automaker's anticipated loss from its operations in China. Due to a decrease in commercial client deliveries, GM reported that first-quarter U.S. car sales fell 1.5%, while retail sales increased by 6%.
Barra has not yet provided any plans for reorganising GM's operations in China. GM reported delivering 2.1 million cars to China last year, nearly half as many as it did for the 4.04 million it sold there in 2017.
Investors are waiting for an update on GM's beleaguered Cruise robotaxi division.
Barra has not said how GM plans to finance the firm's relaunch and reconstruction following a catastrophic accident that caused the company to suspend its autonomous ride operations. According to GM, Cruise would see a $1 billion reduction in spending this year. Since being purchased by GM in 2016, the division has lost more than $8 billion.
On April 9, Cruise said that it will reintroduce human drivers to some of its vehicles in Phoenix, Arizona.
When the Detroit carmaker announced that extra money will be distributed to stockholders in January, its stock price spiked.
Ford derives its power from its commercial vehicle operations, specifically Ford Pro, and its combustion truck division. The carmaker reiterated its prediction of a core profit of $10 billion to $12 billion for this year.
The carmaker declared earlier this month that it would halt two significant programmes for electric vehicles. At an investor presentation, CFO Lawler stated that EV investments won't proceed until they can "stand on their own" and turn a profit.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc